by Calculated Risk on 6/08/2013 08:46:00 AM

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for June 7, 2013.

Changes and comments from surferdude808:

As CR posted yesterday, another bank controlled by Capitol Bancorp, LTD (Ticker: CBCRQ), 1st Commerce Bank, North Las Vegas, NV ($20 million) was closed intra-week. According to a report by SNL Securities, the FDIC used its authority that was received within the Federal Deposit Insurance Corporation Improvement Act of 1991 to close 1st Commerce Bank. Normally, the FDIC must wait for the chartering authority to close a bank. However, this authority allows the FDIC to close a bank to limit losses to the insurance fund when the chartering authority is delayed in terminating the charter. As reported, it has been more than a decade since a bank has been closed in this manner and this is only the fourth time the FDIC has exercised this authority since enactment of the legislation. Capitol Bancorp had been litigating the closure of 1st Commerce Bank and had obtained an injunction that was extended until June 10th, but the FDIC stepped around that action. While the FDIC accelerated the closing to limit losses to the insurance fund, 1st Commerce Bank has a failure cost estimate of $9.4 million, which is inordinately high at nearly 47 percent of the bank's assets.

The fate of the remaining seven banks controlled by Capital Bancorp is uncertain. So far, the four failed banks of Capitol Bancorp have cost the FDIC insurance e fund an estimated $44.2 million. The FDIC could assess the $44.2 million failure cost against the seven banks under cross guarantee authority. At March 31, 2013, the seven banks had cumulative equity of $51.8 million. Thus, an assertion of cross guarantee by the FDIC would likely lead to a closing of the seven banks. Some observers believe the FDIC has been generous in not asserting its cross guarantee authority. The geographic dispersion of the franchise, the unusual capital structure of the banks, or the lack of a single buyer could contribute to the piecemeal closings. The most vulnerable units appear to be Bank of Las Vegas, Henderson, NV ($247 million) and Sunrise Bank of Arizona ($206 million). We will continue to monitor the status of the remaining operating banks of Capitol Bancorp.

Meanwhile, the Unofficial Problem Bank List had a net reduction of one institution to 760 after two removals and one addition. Assets total $277.5 billion, which is the first weekly increase since the last week of January 2013. A year ago, the list held 923 institutions with assets of $355.7 billion.

The other removal from failure this week was Mountain National Bank, Sevierville, TN ($437 million Ticker: MNBT), which had a much more pedestrian estimated failure cost at 7.7 percent of assets. The addition was Colonial Bank, FSB, Vineland, NJ ($633 million Ticker: COBK).

Except for any potential follow through closings, we anticipate a quiet week for changes as the OCC will likely wait until June 21st to publish its actions through mid-May 2013.

by Calculated Risk on 6/07/2013 06:54:00 PM

From the FDIC: First Tennessee Bank, National Association, Memphis, Tennessee, Assumes All of the Deposits of Mountain National Bank, Sevierville, Tennessee

As of March 31, 2013, Mountain National Bank had approximately $437.3 million in total assets and $373.4 million in total deposits. ... The FDIC estimates that cost to the Deposit Insurance Fund will be $33.5 million. ... Mountain National Bank is the 16th FDIC-insured institution to fail in the nation this year, and the first in Tennessee.

Friday is here.

Earlier on the employment report:
• May Employment Report: 175,000 Jobs, 7.6% Unemployment Rate
• Employment Report Comments and more Graphs

by Calculated Risk on 6/07/2013 04:57:00 PM

From the Association of American Railroads (AAR): AAR Reports Increased Rail Traffic for May, and Week Ending June 1

The Association of American Railroads (AAR) today reported that total U.S. rail traffic increased for the month of May 2013 as well as for the week ending June 1, 2013. May 2013 saw the first year-over-year monthly total carload increase in 16 months, and the 42nd straight monthly increase in intermodal traffic.

Intermodal traffic in May totaled 1,214,116 containers and trailers, up 3 percent (35,790 units) compared with May 2012. The weekly average of 242,823 units for May was the highest weekly intermodal average for any May in history. Carloads originated in May totaled 1,401,584, up 0.7 percent (9,551 carloads) compared with the same month last year.
...
“The economy is still not firing on all cylinders, and rail traffic in May reflects that,” said AAR Senior Vice President of Policy and Economics John Gray. “Pockets of rail traffic growth, such as autos, nonmetallic minerals, and commodities related to crude oil extraction are being countered by continued weakness in steel-related commodities, paper, and grain, among others.
emphasis added

Click on graph for larger image.

This graph from the Rail Time Indicators report shows U.S. average weekly rail carloads (NSA).  Green is 2013.

Total U.S. rail carloads rose 0.7% (9,551 carloads) in May 2013 over May 2012 to 1,401,584 carloads, their first year-over-year monthly increase in 16 months. U.S. rail carloads averaged 280,317 per week in May 2013, up from 277,181 in April 2013 and 278,407 in May 2012 ...

Once again, petroleum and petroleum products led the way — their carloads on U.S. railroads were up 42% (20,837 carloads) in May 2013 over May 2012. ...

U.S. rail carloads of lumber and wood products fell 1.8% (288 carloads) in May 2013, just their second year-over-year decline since 2009.

Note that lumber was a little weaker than a year ago - a rare year-over-year decline.

Graphs and excerpts reprinted with permission.

The second graph is for intermodal traffic (using intermodal or shipping containers):

Intermodal traffic is on track for a record year in 2013.

Year-to-date intermodal volume on U.S. railroads through May was 5,261,051 units, up 4.1% (207,236 units) over the same period in 2012.

Earlier on the employment report:
• May Employment Report: 175,000 Jobs, 7.6% Unemployment Rate
• Employment Report Comments and more Graphs

by Calculated Risk on 6/07/2013 12:47:00 PM

Depending on how the economy performs over the summer, the Fed could slow QE bond purchases later this year.  The most likely time to announce a change in purchases would be either at the September or December FOMC meeting (those meetings will be followed by a Bernanke press conference). My guess right now is the Fed will wait until the end of the year or early next year, mostly because I think fiscal policy will be a significant drag on economic activity over the next couple of quarters - and also because inflation is still below the Fed's target.

From Jon Hilsenrath at the WSJ: Fed on Track to Ease Up on Bond Buying Later This Year

Federal Reserve officials are likely to signal at their June policy meeting that they're on track to begin pulling back their $85-billion-a-month bond-buying program later this year, as long as the economy doesn't disappoint.

Two keys: "later this year" if "the economy doesn't disappoint".

The central bank faces a number of challenges. One is managing the signal that they send to the market with their next series of moves.

Officials in their public statements have been trying to make clear that they are going to proceed cautiously with the bond program and are still probably years away from raising short-term interest rates, which have been near zero since late 2008.

It is clear they will not raise rates for a long time.

Officials will be updating their forecasts at the next policy meeting. One risk: Economic headwinds from tightening fiscal policy could continue longer than they expect.

by Calculated Risk on 6/07/2013 10:30:00 AM

Total nonfarm employment is up 2.115 million over the 12 months, and up 946 thousand so far in 2013 (a 2.27 million annual pace).

Private employment is up 2.173 million over the last year, and up 972 thousand so far in 2013 (a 2.33 million annual pace).

Of course public payrolls are continuing to shrink (four years of declining public payrolls now).  Public employment is down 58 thousand over the last year, and down 26 thousand so far in 2013 (a 62 thousand annual pace).

And on construction employment: Construction employment is up 189 thousand over the last year, and up 93 thousand so far in 2013 (a 223 thousand annual pace).

A few more graphs ...

Employment-Population Ratio, 25 to 54 years old

Click on graph for larger image.

Since the participation rate declined recently due to cyclical (recession) and demographic (aging population) reasons, an important graph is the employment-population ratio for the key working age group: 25 to 54 years old.

In the earlier period the employment-population ratio for this group was trending up as women joined the labor force. The ratio has been mostly moving sideways since the early '90s, with ups and downs related to the business cycle.

This ratio should probably move close to 80% as the economy recovers. The ratio increased to  76.0% in May, the highest since April 2009.  The participation rate for this group also increased in May to 81.3%.  The decline in the participation rate for this age group is probably mostly due to economic weakness, whereas most of the decline in the overall participation rate is probably due to demographics.

Percent Job Losses During Recessions


This graph shows the job losses from the start of the employment recession, in percentage terms - this time aligned at maximum job losses.

In the earlier post, the graph showed the job losses aligned at the start of the employment recession.

This financial crisis recession was much deeper than other post WWII recessions, and the recovery has been slower (the recovery from the 2001 recession was slow too). However, if we compare to other financial crisis recoveries, this recovery has actually been better than most.

Part Time for Economic Reasons

From the BLS report:

In May, the number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was unchanged at 7.9 million. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

The number of part time workers decreased slightly in May to 7.904 million.

These workers are included in the alternate measure of labor underutilization (U-6) that decreased slightly to 13.8% in May. This matches the lowest level for U-6 since December 2008.

Unemployed over 26 Weeks

This graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 4.357 million workers who have been unemployed for more than 26 weeks and still want a job. This was slightly from from 4.353 million in April. This is trending down, but is still very high.  Long term unemployment remains one of the key labor problems in the US.

State and Local Government

This graph shows total state and government payroll employment since January 2007. State and local governments lost jobs for four straight years. (Note: Scale doesn't start at zero to better show the change.)

In May 2013, state and local governments added 11,000 jobs, and state and local employment is up 25 thousand so far in 2013.

I think most of the state and local government layoffs are over.  Of course total public employment declined again as the Federal government layoffs are ongoing - and with many more layoffs expected due to the sequestration spending cuts.

In 2013, construction is a bright spot for employment, the drag from state and local cutbacks is mostly over - and Federal fiscal cutbacks are an ongoing drag. Pretty much as expected.

by Calculated Risk on 6/07/2013 08:30:00 AM

From the BLS:

Total nonfarm payroll employment increased by 175,000 in May, and the unemployment rate was essentially unchanged at 7.6 percent, the U.S. Bureau of Labor Statistics reported today. ...
...
The change in total nonfarm payroll employment for March was revised from +138,000 to +142,000, and the change for April was revised from +165,000 to +149,000. With these revisions, employment gains in March and April combined were 12,000 less than previously reported.

The headline number was slightly above expectations of 167,000 payroll jobs added.  Employment for March and April combined was revised slightly lower.

Click on graph for larger image.

NOTE: This graph is ex-Census meaning the impact of the decennial Census temporary hires and layoffs is removed to show the underlying payroll changes.

The second graph shows the unemployment rate.

The unemployment rate increased to 7.6% in May from 7.5% in April.

The unemployment rate is from the household report and the household report showed a sharp increase in employment, and that meant a lower unemployment rate.


The third graph shows the employment population ratio and the participation rate.

The Labor Force Participation Rate was increased to 63.4% in May (blue line) from 63.3% in April. This is the percentage of the working age population in the labor force. 

The participation rate is well below the 66% to 67% rate that was normal over the last 20 years, although a significant portion of the recent decline is due to demographics.


The Employment-Population ratio was unchanged at 58.6% in May (black line). I'll post the 25 to 54 age group employment-population ratio graph later.


The fourth graph shows the job losses from the start of the employment recession, in percentage terms, compared to previous post WWII recessions. The dotted line is ex-Census hiring.

This shows the depth of the recent employment recession - worse than any other post-war recession - and the relatively slow recovery due to the lingering effects of the housing bust and financial crisis.

This was at expectations - of course expectations are fairly low.  I'll have much more later ...

by Calculated Risk on 6/06/2013 09:40:00 PM

First, LPS released their Mortgage Monitor report for April today.   According to LPS, 6.21% of mortgages were delinquent in April, down from 6.59% in March

LPS reports that 3.17% of mortgages were in the foreclosure process, down from 4.20% in April 2012.

This gives a total of 9.38% delinquent or in foreclosure. It breaks down as:

• 1,717,000 properties that are 30 or more days, and less than 90 days past due, but not in foreclosure.
• 1,394,000 properties that are 90 or more days delinquent, but not in foreclosure.
• 1,588,000 loans in foreclosure process.

For a total of ​​4,699,000 loans delinquent or in foreclosure in April. This is down from 5,617,000 in April 2012.

Click on graph for larger image.

The first graph from LPS shows percent of mortgage delinquent and in-foreclosure by month.

The percent of delinquent loans is still high (normal is in the 4% to 5% range), but the percent of delinquent loans is falling quickly.

The second graph shows the percent of loans in foreclosure in judicial and non-judicial foreclosure states.

From LPS:

[T]he disparity in foreclosure timelines between judicial and non-judicial states -- continues to grow. Still, as LPS Applied Analytics Senior Vice President Herb Blecher explained, the steady return to a relative degree of normality in the foreclosure sale rate has helped to bring down foreclosure inventories at the national level.

“The foreclosure sale rate in judicial states rose nearly 17 percent from March to April,” Blecher said. “This is the highest that rate has been since the moratoria and process reviews in the fall of 2010 led to a near-complete halt in the process in both judicial and non-judicial states. Non-judicial rates were relatively quick to bounce back, but judicial states experienced a much slower, though steady, increase. This has helped drive an overall decline in foreclosure inventory at the national level, which is now at 3.2 percent -- its lowest point in four years.

“The situation is far from resolved,” Blecher stressed. “Foreclosure inventories in judicial states are still more than three times the size of those in non-judicial states, and national inventories are still more than seven times pre-crisis levels. Additionally, recently announced moratoria will need to be monitored to determine the impact on timelines, as well as the rate of the improvement trend.”

There is much more in the mortgage monitor.

Friday economic releases:
• At 8:30 AM, the BLS will release the Employment Report for May. The consensus is for an increase of 167,000 non-farm payroll jobs in May; the economy added 165,000 non-farm payroll jobs in April. The consensus is for the unemployment rate to be unchanged at 7.5% in May.

• At 3:00 PM, Consumer Credit for April from the Federal Reserve. The consensus is for credit to increase $14.0 billion in April.

by Calculated Risk on 6/06/2013 07:20:00 PM

From the FDIC: Plaza Bank, Irvine, California, Assumes All of the Deposits of 1st Commerce Bank, North Las Vegas, Nevada

As of March 31, 2013, 1st Commerce Bank had approximately $20.2 million in total assets and $19.6 million in total deposits. ... The FDIC estimates that cost to the Deposit Insurance Fund will be $9.4 million. ... 1st Commerce Bank is the 15th FDIC-insured institution to fail in the nation this year, and the first in Nevada.

Surferdude has been discussing this bank in his weekly unofficial problem bank posts. Three weeks ago he wrote:

[I]n Nevada, the Nevada Department of Business and Industry's Financial Institutions Division was prevented from closing 1st Commerce Bank, North Las Vegas ($24 million) through another legal action by Capitol Bancorp.

And last week he noted:

There is nothing new to report on the status of Capitol Bancorp's banking subsidiaries, particularly 1st Commerce Bank, North Las Vegas ($24 million), which is subject to a sealed hearing on the ability of the Nevada Department of Business and Industry's Financial Institutions Division to terminate its banking charter.

This is the second mid-week Capitol Bancorp related closing in the last month - both closings were delayed by legal filings.

by Calculated Risk on 6/06/2013 05:54:00 PM

From Jack Ewing at the NY Times: Down So Long It Looks Like Up to the Euro Zone

This is what passes for good economic news in Europe: Spain just added 265 jobs. ... Never mind that nearly five million people in Spain are out of work. The latest unemployment report from the government, issued on Tuesday, was held up by Mr. Rajoy as a sign that maybe, just maybe, the economy is getting better.

Nearly six years after the financial crisis in the United States spread across the Atlantic, plunging Europe into recession and, in some places, desperate depression, “good” is relative. ...

During a visit to Athens last week, the Dutch finance minister said he detected “the first signal of a turn in the economy.” Then, on Wednesday, news arrived from Brussels that the Greek economy was indeed getting better. It shrank by only — only — 5.3 percent in the first three months of the year. That was in fact an improvement: it had contracted 5.7 percent the previous quarter.

Eventually the euro zone will start growing again. The will not be a sign of "success" of current policies - these are already a clear failure given the severe pain and suffering in the interim. 

by Calculated Risk on 6/06/2013 02:24:00 PM

On Friday, at 8:30 AM ET, the BLS will release the employment report for May. The consensus is for an increase of 167,000 non-farm payroll jobs in May, and for the unemployment rate to be unchanged at 7.5%.

Here is a summary of recent data:

• The ADP employment report showed an increase of 135,000 private sector payroll jobs in May. This was below expectations of 171,000 private sector payroll jobs added. The ADP report hasn't been very useful in predicting the BLS report for any one month. But in general, this suggests employment growth below expectations.

• The ISM manufacturing employment index decreased in May to 50.1% from 50.2% in April. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS reported payroll jobs for manufacturing decreased by close to 20,000 in May. The ADP report indicated a 6,000 decrease in manufacturing jobs.

The ISM non-manufacturing (service) employment index decreased in May to 50.1% from 52.0% in April. A historical correlation between the ISM service employment index and the BLS employment report for non-manufacturing, suggests that private sector BLS reported payroll jobs for non-manufacturing increased by about 65,000 in May.

Taken together, these surveys suggest only around 45,000 jobs added in May - significantly below the consensus forecast.

• Initial weekly unemployment claims averaged about 348,000 in May. This was up from 343,000 in March, but still near the low for the year.

For the BLS reference week (includes the 12th of the month), initial claims were at 344,000; down from 355,000 in April.

• The final May Reuters / University of Michigan consumer sentiment index increased to 84.5 from the April reading of 76.4. This was the highest level since July 2007. This is frequently coincident with changes in the labor market, but also strongly related to gasoline prices and other factors.

• The small business index from Intuit showed 35,000 payroll jobs added, the same as for April. This index is improving a little.

• And on the unemployment rate from Gallup: U.S. Payroll to Population and Unemployment Worsen in May

Gallup's unadjusted unemployment rate for the U.S. workforce was 7.9% for the month of May, a half-point increase over April, and statistically unchanged from May 2012 (8.0%).

Gallup's seasonally adjusted U.S. unemployment rate for May was 8.2%, up from 7.8% in April. Gallup calculates its seasonally adjusted employment rate by applying the adjustment factor the U.S. government used for the same month in the previous year.

Note: So far the Gallup numbers haven't been very useful in predicting the BLS unemployment rate.

• Conclusion: The employment related data was mostly disappointing again in May.  The ADP and ISM manufacturing reports suggest a decrease in hiring. However weekly claims for the reference week were slightly lower in May than in April (although claims for the month were higher), and consumer sentiment increased sharply.

There is always some randomness to the employment report, but my guess is the BLS will report below the consensus of 171,000 jobs added in May.  Based on the ISM reports (and more), we might see a very weak report on Friday.